Is a Deleveraging Trend Killing the Economy?

It’s good news that household debt relative to income has plunged in recent years. But at what cost?

By

Liz Ann Sonders

June 22, 2016

Much ink has been spilled on the post-debt supercycle era in which we sit, including by yours truly. In today’s report, I want to focus on households; perhaps because the U.S. public sector hasn’t yet begun talking honestly about its debt problem. However, households were “forced” into their deleveraging cycle when the financial crisis hit, following the bursting of the housing bubble.

As you can see in the chart below, the ratio of household debt to disposable income in the United States fell dramatically in the aftermath...